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Budget2000 Tuesday, 21 March, 2000, 18:39 GMT
The chancellor's speech: part three
Part three of Chancellor Gordon Brown's Budget speech

A strong civic society takes seriously its obligations to our elderly;

  • to the very poor pensioners whom we must help out of poverty;
  • to those just above benefit levels whose lifetime savings should not - as in the past - be a barrier to securing a better retirement income;
  • to those who, while better off, are on fixed incomes.

    The Secretary for Social Security is to launch a consultation on how, for the next Parliament, we can develop a new pensioners credit - designed not only to lift the poorest out of poverty, but also to do more for those with modest occupational pensions and savings who should not be penalised for having worked hard all their lives and saved for their retirement.

    Under the framework on which we will consult, an older pensioner with income, for example, of less than 100 a week, or a couple with less than 150 a week, would qualify for a pension credit to raise their income.

    'Unfairly debarred'

    As we consult on this reform, we are making immediate changes.

    The pensioners tax allowance will be set this year at 5,790 and for those over 75 at 6,050.

    Nearly six million pensioners will not pay any income tax at all.

    And with the new 10p rate on savings, 1.5 million pensioners will, for the first time, pay tax at half the rate of the past, at 10p not 20p.

    And I have decided to do more today for elderly citizens with modest savings whose very thrift has perversely and unfairly debarred them from receiving the income they need.

    For years any pensioner with savings over 3,000 has lost out on income support.

    The last government froze the limit at 3,000 in 1988.

    I have decided from next April to double the limit - raising it from 3,000 to 6,000.

    The cut off point for income support was frozen at 8,000 of savings in 1990. We will raise that to 12,000.

    'Scarred our country'

    As a result, 500,000 elderly people - previously penalised for their thrift and savings - will be on average 250 a year better off, many better off by 1,000 a year.

    Fuel poverty scarred our country for too long.

    That is why in our first Budget we cut VAT on fuel; why in our second the winter allowance was introduced at 20 and then in our third Budget raised to 100, available to all 8.5 million households with a resident over 60.

    Under this government the winter allowance will be paid this year and paid every year.

    I have considered whether to raise the allowance in line with inflation, which would put it up to 103, or in line with earnings, which would raise it to 104.50.

    But I have decided in this Budget not to raise it by 4 or even 5 but to raise it by 50 to 150.

    'Affordable warmth'

    This winter allowance, at 150, will now cover up to four winter months of a hard pressed pensioner's fuel bill.

    I can further announce that 600,000 of our elderly will benefit from the new "affordable warmth" programme to install fuel efficient central heating in one million homes throughout Britain.

    Beginning on 1 November all pensioners over 75 will receive the free TV licence, worth 104. And I can announce today that any pensioner over 75 who has an unexpired licence which runs beyond 1 November will also be eligible for a refund for every unexpired month.

    Of all the measures to lift our poorest pensioners out of poverty, the minimum income guarantee is the most essential.

    We will raise the minimum income guarantee in line with earnings next year.

    For a single pensioner it will be worth 82 a week, and for pensioners over the age of 80 it will be 90 a week. For a couple it will be 127 a week and for over-80s, 137 a week.

    Taking these measures together - the winter allowance, the TV licence and the higher minimum guarantee - by April next year one million pensioners will be, compared with 1997, 20 a week, or 1,000 a year, better off.

    As we look to the future, I want all to be able to achieve the security of a wealth-owning democracy, with prosperity reaching the people and places the economy has too long forgotten.

    So we want to do more to help people start a bank account and start saving, more to help people invest in their pension, more to help people get on to the first rung of the savings ladder and make provision for their future.

    Basic banking service

    Today in Britain up to 3.5 million adults have no bank account. The Cruickshank Report has revealed that a basic affordable bank account for everyone would be profitable for the banks and that using banking facilities - and not the cash economy - just to pay gas and electricity bills could save families 50 a year, or one pound a week.

    I am now inviting the banks to work with the Post Office to offer this basic banking service to all.

    And I want working families to be able to move seamlessly from starting an account to starting to save.

    I have already announced measures to reward pensioner savings.

    This year 6.5 million individual savings accounts have already been started. For the coming year, the ceiling was announced at 5,000 of savings. Instead, for one more year I will keep the ceiling at 7,000.

    I said last November that I would, in future, make an annual Budget decision on real term rises in road fuel duties - the money to go to a new ring-fenced fund for roads and public transport.

    Since the Pre-Budget Report world oil prices have risen rapidly from $23 to $30 a barrel.

    So, in this Budget I have decided that, beyond the automatic inflation rise of two pence a litre, there will be no real terms increase in road fuel duties.

    And to encourage the use of ultra-low sulphur petrol, I will set fuel duty at 1p per litre below other petrol from 1 October.

    Vehicle excise duty

    An extension to the new lower rate vehicle excise duty comes in on 1 March next year. Until that date I have decided - for all cars - to freeze vehicle excise duty.

    At present the lower rate - at 55 below the standard rate - is available for 1.5 million cars.

    From next year I will extend the reduced rate of vehicle excise duty to cars at 1200 ccs or below.

    This will cut vehicle excise duty to 105 for 2.2 million additional cars, the reduced rate will now cover almost four million cars.

    I am also introducing from 1 March next year, for newly purchased cars, a four band vehicle excise duty rewarding the most environmentally friendly vehicles.

    Under the rates I am publishing today, 95% of new cars will pay less than they would under the current system, half of them at least 30 less.

    We will also cut the vehicle excise duty for forty thousand 38 tonne and 41 tonne lorries by 500; the 40 tonne class lorries will have their rate cut by 1,800; for all other heavy lorries rates will be frozen.

    Climate change levy

    The environmental impact of these tax cuts - taken together with the revenue neutral proposals for company cars - will be a reduction in carbon emissions of one million tonnes by 2010.

    This is on top of the five million tonnes reduction in carbon emissions by 2010 as a result of the climate change levy which is also revenue neutral and on which the Financial Secretary is publishing further details today.

    To further cut pollution we will legislate the aggregates levy, which will again be made revenue neutral through a further 0.1% cut in employers' national insurance.

    These two measures will together cut employers' national insurance contributions by 1.35bn.

    There is also a strong environmental case for reducing stamp duty for development of brown-field sites, as recommended by the Rogers Report. The Paymaster General will now consult in detail on the measure.

    For the property market, in addition to the previously announced withdrawal of mortgage interest tax relief, stamp duty on property sales will be raised for sales above 250,000 to three per cent and for sales above 500,000 to four per cent. But for properties below 250,000 I propose no change. And I also propose to freeze insurance tax.

    Duty on spirits frozen

    Last year I froze duties on all spirits.

    This year an inflation rise would push the price of whisky up by 22p a bottle.

    Because of the competitive position of the industry I will this year continue to freeze duty on all spirits.

    Beer will rise only by inflation - by one pence a pint- and wine only by inflation, by four pence a bottle.

    Now that the return-leg exemption for air fares has been found in breach of Single Market law, I am taking the opportunity to introduce a new, fairer and lower air passenger duty - at an overall cost to the Exchequer of 80m a year.

    The tax on economy flights within the UK will be the same or lower. For economy flights outside Europe the rate will remain at 20 and there will be a new business class rate of 40.

    Thirty million economy passengers travelling to Europe will have air passenger duty cut in half - from 10 to 5. And on flights from the Scottish Highlands and islands I will abolish air passenger duty altogether.

    On tobacco, the Paymaster General will tomorrow announce tough new measures to tackle smuggling.

    Medical trends

    Cigarette taxes will rise by five per cent above inflation from tonight - by 25 pence a packet - with every penny of the extra revenue going - as I promised - to funding our hospitals and the National Health Service.

    And I am also commissioning a long term assessment of technological, demographic and medical trends over the next two decades that will affect the Health Service, to report to the Treasury in time for the start of the next spending review in 2002.

    I have a number of other fiscal decisions to make.

    Debt interest payments are down by 4bn a year. And because we have not spent and we will not spend more at the expense of being prudent, we have also made the tough decisions to tackle benefit fraud, to move people from welfare to work, and to control the social security budget.

    Compared to last year's Budget forecast, social security spending is lower this year by 2bn and will be another 2bn lower next year, a saving of 4bn in all.

    Because we have cut borrowing and reformed the welfare state, cutting the costs of social and economic failure, and because we have been financially disciplined, extra resources are now available for our priorities.

    And, Mr Deputy Speaker, a Budget is about priorities.

    'Risk return to boom and bust'

    In my Pre-Budget consultations I have read carefully detailed Budget representations and examined proposals from all sides of the House.

    I have examined proposals for transferrable tax allowances at 4.25bn, private health insurance tax reliefs at half a billion and for abolishing capital gains tax at 3.9bn and top rate tax cuts at 690m for every 1p.

    And I have established that, for these last two alone, 75% of the tax cuts would go to the wealthiest five per cent of the population, leaving us nothing extra for public services like the NHS.

    And because the proposals are made irrespective of economic circumstances, they would risk a return to boom and bust.

    I have decided instead on a prudent and responsible approach that allows us to repay debt and lock in an even greater fiscal tightening, and that allows us even after meeting our fiscal rules, to target tax cuts on hard working families and to release for our public services in the coming year alone additional resources of 4bn.

    These extra resources are not at the expense of our prudence, they arise because of our prudence.

    I can announce an immediate new investment of 280m in transport, 250m of it to a ring fenced fund for improving roads and public transport including transport in rural areas.

    The Deputy Prime Minister will be making a statement on individual allocations for the coming year later this week.

    Education spending

    I am able to announce an additional 285m to be spent from April for fighting crime. Later this week the Home Secretary will announce further details.

    And I am also announcing additional investment in UK education starting on 1 April of 1bn.

    Under the Secretary for Education and Employment's leadership, class sizes for five to seven year olds in primary schools are being cut and significant improvements in reading, writing, and maths achieved.

    Last year he made a payment to every primary school for books of 2,000.

    Now this year more cash will go directly into the classroom.

    To support the Secretary of State's drive for literacy and numeracy, every one of these 18,000 primary schools will from 1st April receive a new payment of 3,000 pounds for the smallest school and rising to 9,000 for the largest.

    The money will go straight to the head teacher.

    And schools offering special tuition to help the weakest pupils catch up will be able to draw on an extra 20m pounds to boost pupil results.

    Payments to schools

    The Secretary of State is proposing to back up reforms in our secondary schools with new measures to boost the performance of those falling behind and to raise the performance of all pupils by the age of 14.

    To support these reforms in our secondary schools he will now make a payment to every head teacher for books, equipment and staffing.

    Last year he was able to make an extra payment for books and equipment of 2,000.

    This April every one of these 3,500 secondary schools will receive a minimum payment of 30,000 and the largest schools will receive 50,000.

    A total of 300m in new investment through these measures alone, money paid direct to the school and to the head teacher for use in the classroom.

    And to advance our goal of 50% of young people in higher education, the Secretary for Education will also announce that three times as many 16 year olds will, from this Autumn, benefit from education maintenance allowances - worth up to 30 a week and that next month he will launch a national campaign to raise staying on rates.

    Further announcements on the full allocation of additional money for education will be made by the Secretary of State on Thursday, and by the Scottish and Welsh Administrations and the Northern Ireland Secretary.

    Income tax

    I can announce today that for the year from 1 April the real terms rise in the UK education spending will be 8%.

    After these new spending decisions, I have a decision to make on income tax. Our prudent approach allows us to repay debt, invest in public services, and cut taxes for hard working families.

    I will proceed from 6 April with our one pence cut in the basic rate of income tax from 23% to 22%, the lowest basic tax rate for 70 years.

    I am also combining the cut in income tax with a further tax cut - this time for families.

    Next April for five million families with children, the new children's tax credit will be increased from 416 to 442 a year. For these families this credit will now be worth twice as much as the old Married Couples Allowance it replaces.

    And it reduces the family tax bill from April next year by a total of 8.50 a week, on top of the 60p rise in child benefit this April for every mother.

    Taken with the 10p income tax rate and the 22p basic rate, and the normal indexation of tax allowances and thresholds, next year's tax burden for the working family will be the lowest since 1972 - a fall from the 21.5% we inherited to 18.8%.

    'Original principles'

    As I said a Budget is about priorities.

    A choice has been posed between investing in a National Health Service financed by public expenditure with access based on need, and privatised health care dependent on private insurance.

    This government is committed to a publicly funded National Health Service true to the original principles of its founders.

    Securing the long term future of the NHS is one of the great challenges this country must and will meet.

    Tomorrow the Prime Minister will make a statement to this House on the work he and the Health Secretary will lead over the next four months to reform and modernise the Health Service.

    The government's plan, to be published in July alongside the detailed public spending allocations, will address long standing variations in efficiency performance and health outcomes, and the right balance between preventative, primary and hospital care.

    And now that the overall public spending total is set for the years until 2004, I have decided that I can back long term reform with long term resources for the Health Service by today announcing the NHS allocation not just for one year but for the next four years.

    Since its creation, National Health Service spending has risen by an average 3.3% a year above inflation.

    Nurse recruitment

    Under the last government it rose by 2.9%.

    We have decided that in the years from now until 2004 the NHS will grow by twice as much - by 6.1% a year over and above inflation, by far the largest sustained increase in NHS funding of any period in the 50 year history of the Health Service.

    Last year the equivalent of just over 1,850 per household was spent on the NHS.

    By 2004 more than 2800 per household will be spent on the NHS.

    Half as much money again for health care for every family in our country.

    In the UK there has been an increase of 4,000 in the number of nurses working in the Health Service. That was just a start. With today's extra resources, and the reforms still to come, we can plan to recruit and train up to 10,000 more nurses.

    Let me emphasise that more resources must mean more reform and modernisation .

    'Budget for all the people'

    The prime minister, in his statement to the House tomorrow, will set out how with the guarantee of sustained investment, the government, the professions and the NHS can together rise to the challenge of delivering better health care for all.

    I can make one further announcement.

    In ten days time at the beginning of the new financial year the NHS was scheduled to have a 2.9bn addition on last year.

    I have decided to raise that figure with immediate effect by allocating not only the 300m in tobacco revenues I promised last Autumn, but by adding to that to achieve in total an extra 2bn - making a rise next year of 4.9bn - extra money the NHS can start using from 1 April.

    So health spending will rise from last year's 45.1bn, and this year's 49.3bn to next year: 54.2bn; the year after 58.6bn; then 63.5bn; and then from April 2003, 68.7bn pounds - over these five years a cash increase of over 50%, a real terms increase of 35%.

    New money we can provide because we have made our choice: a Budget that unites the whole country, a Budget for all the people.

    We have been prudent for a purpose: a stronger fairer Britain. And I commend this Budget to the House.

  • See also:

    21 Mar 00 | Budget2000
    21 Mar 00 | Budget2000
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